White Goods :

Facts and Figures :

4 Facts and Figures History
Refrigerators are being manufactured in India for the last four decades.
Till early 90’s only direct cool refrigerators were used in India.
Videocon introduced frost-free refrigerators in 1991.
Past trends
Demand for refrigerators grew from 11,000 units in 1968-69 to about 2.25 million units in 1996-97
Demand for refrigerators has grown at a CAGR of around 22% from 1.04 mn units in 1992-93 to 2.18 mn units in 1997-98.
The total stock went up from 3.3 million units in 1968-69 to 17.2 million units in 1996-97, but still covering only about half of the total households in middle and high-income groups.

Facts and Figures :

5 Facts and Figures Current Scenario
The current demand for refrigerators is approx. 2.9 mn units per annum.
The 165-200 ltrs of refrigerators comprise of 80% of the total demand.
Frost free refrigerators contribute 15% of the total demand with 5% coming from the premium range.

Supply :

10 Supply Installed capacity of refrigerators in FY99 was about 5.2mn
165ltr direct cool refrigerators were estimated at 2.7mn
As per ASCON, during FY2000, the refrigerator production grew by 5% Capacity Utilization and Sales of Major player in 1997-98 were as follows Source: Annual Reports

Product :

12 Product Process - Runs on the vapor compression cycle, as does an air-conditioner.
Main components
Sealed compressor, condenser coils, a capillary tube, evaporator and a control thermostat.
Presently almost all refrigerators now are without coils running zigzag at the back.
Refrigerators nowadays are frost-free, i.e. they have a timer mechanism for automatic defrosting.
Also, many refrigerators have several additional features like multi-doors, ice dispensing facilities, a special fan for uniform airflow and so on.
The refrigerant gas used is a CFC (Freon 11 or 12). But with the date for implementing the Montreal Protocol drawing near, some companies like Whirlpool, have started manufacturing CFC free refrigerators or are in the process of setting up new capacities.

Competitive Profile :

Marketing Strategies :

24 Marketing Strategies LG Electronics’ strategy includes developing non-traditional channels of selling even while it continues to strengthen its retail sales network. The company has banded together small teams of people to be attached to its branch offices to carry out brand promotions in smaller cities and towns.

Marketing Strategies :

25 Marketing Strategies Electrolux - Multi-pronged strategy
Aggressive product launches
Focus on quality and increased rural reach
Focus on building a strong market for its 35-year old brand – Kelvinator
Introduction of at least four new refrigerator models every year
The group has outlined a multi-brand marketing strategy aimed at customers
high-end - Electrolux
upper end and middle income - Kelvinator
lower segments - Voltas and Allwyn
Voltas brand will soon be phased out.

Marketing Strategies :

26 Marketing Strategies Electrolux (Contd.)
Different marketing strategies for different customer segments.
The focus will also be on the price-sensitive rural markets.
To push the products, the dealers are trained such that they are able to explain the value-addition to prospective customers.
At the top-end, the company's products are priced higher than the competitors.
Strategy for growth this year includes
Consolidation of its existing operations and
Entering new product segments.
Electrolux has put the Internet on the forefront of its sales strategy.

Marketing Strategies :

27 Marketing Strategies Whirlpool
Very aggressive dealer-push strategy to get a foothold in the highly competitive marketplace
Discovered that most customers associated refrigerators with ice and cooling
Realized that the upwardly mobile consumer was sheepish at the thought of having to borrow ice
The company merged the two findings to create its hummable Ice, Ice campaign
Samsung
Samsung – ‘Market based Management’ strategies include:

Brand Building :

28 Brand Building Sponsorship of TV programmes on various channels
To position its products as an ‘elite’ product
Improve brand visibility
Samsung, LG, IFB and Electrolux sponsored movies on the Star Movies network.
Samsung and IFB, for instance, sponsor the Saturday and Sunday night premieres.
LG has sponsored, ‘Kaun Banega Crorepati?’.

Brand Building :

29 Brand Building Branding strategies
Videocon - Umbrella branding strategy for their products.
VIL claims to be the first company in India to introduce frost-free refrigerators and fully automatic washing machines.
Assiduously built images over the years.
Convey the message of leadership to their customers. Videocon, for example, has changed its logo to convey the message of precision, quality and technical edge in all company activities.

Brand Building :

30 Brand Building Kelvinator
A good example of how a well-known and popular brand suffers due to a lack of adequate marketing support
Early entrants in the market
Limited portfolio of models
Lower brand visibility and indifferent dealers
Electrolux (which has bought over the brand since January 1997) - bolster the brand
Kelvinator will be the flagship brand straddling most of the market segments
Kelvinator being present in India for a long time and popular as a brand which is the ‘coolest one’, was chosen ahead of others

Brand Building :

31 Brand Building Kelvinator (Contd.)
A new campaign for the brand was launched as part of a mega promotion exercise at a cost of Rs160mn.
The earlier popularity of "the coolest one" campaigns ensured that it is continued with.
In one of the recent ads, an old man’s dentures, kept in a bowl of water, are seen chattering every time the door of a Kelvinator refrigerator is opened.
Some of the print-ads campaigns also highlighted Kelvinator as a refrigerator, which freezes ice within no time and saves power consumption by as much as 33%.
The product portfolio has been beefed up with the introduction of three new models including one in the 300-litre segment. A new frost-free range was also introduced.

Industry Analysis :

34 Industry Analysis Economies of scale
Godrej, BPL , Whirlpool, Videocon and Voltas have achieved economies of scale – unit cost low.
Godrej has a capacity utilization of 75% and the highest capacity in the industry.
Godrej also possesses economies of vertical integration as it manufactures its own compressors.
BPL and Videocon who are currently outsourcing their compressors also plan to set up their own manufacturing units for compressors in the long run.
…any new entrant to come in at a large scale and risk strong reactions.
The industry has high exit barriers for the members who have invested in the manufacturing facilities in India in the form of specialized assets.

Industry Analysis :

35 Industry Analysis Product differentiation:
Godrej, BPL and Videocon - very old players in the Indian market, high brand awareness and consumer loyalties. These brand names are associated with trust and reliability in the Indian market.
Korean players - LG and Samsung who engaged in heavy advertising and brand promotion, created a niche for them in the premium segment.
…new entrant to spend heavily to overcome existing consumer loyalties and to build a brand image.
Capital requirements:
Huge Capital requirements - advertising, product development, production facilities, distribution channel credit, inventories and for covering up the start-up losses.

Industry Analysis :

36 Industry Analysis Access to the distribution channels:
Godrej, Videocon, Voltas and Allwyn – cater to mass market, have a strong distribution and dealer network.
Urban and rural presence
Established relationship/developed ties with the channel members over the period of time
Whirlpool has also developed a strong network of 4000 dealers in urban and semi-urban areas in a period of few years.
South Korean majors like Samsung and LG have a dealer network of more than 1500, mainly in urban areas and plan to expand it in rural and semi-urban areas also.
… a major barrier as the new entrant has to persuade the channels to accept its product through high margins, promotional allowances, better credit facilities and advertising support, which will reduce the profits.

Industry Analysis :

37 Industry Analysis Cost disadvantage independent of scale
Learning or Experience curve:
Old players viz., Godrej, BPL, Videocon are high on the experience curve, as high local market knowledge.
Government policy:
Duties on the imported Refrigerators and refrigerator parts - advantage to the Indian Players and in a way protect them from price competition in the market with the MNCs.

Industry Analysis :

38 Industry Analysis Rivalry – Very High - Intense rivalry in the various segments
Same dealer network
Low differentiation, high ad spent
Have high strategic stakes in the refrigerator business - major fraction of their revenues come from this business
Pressure from the substitutes - No threats As no substitutes
The domestic refrigerators have no substitutes and so it faces no threats in terms of that.
Bargaining power of the buyers - High
Presence of many competitive products in the market.
Low differntiation – switching between the different brands based on other criteria such price, service, warranty, promotion and financing schemes.
Bargaining power of the suppliers - Not very High

Critical Success Factors :

Strategic Group Mapping :

40 Strategic Group Mapping Strategic group mapping of industry players:

Competitive Analysis :

41 Competitive Analysis

Positioning :

42 Positioning Premium Strategy - LG, Samsung, Daewoo
Operating only in the frost-free segment
Large product length
Products only in the above 300 ltrs segment
The brands follow premium strategy of high quality at high price
They are targeting to the upper income, upper higher middle class of the society with the products that are associated with status
These companies have shown a tremendous growth in few years
High Value Strategy - BPL , Whirlpool:
Frost-free models in the below 300 ltrs capacity segments as well as the above 300 ltrs segment
The models in above 300 ltrs segment cater to the replacement market and to the higher middle class
Emphasis on providing high quality at a moderate price
Below 300 ltrs - targeted at the first time buyers of middle class and are not high in price

Positioning :

43 Positioning Medium Value Strategy - Godrej, Kelvinator
Old brands of India, high brand awareness
Presence in urban as well as the rural markets
Mainly serving to the direct cool segment
Have few models in the frost-free segment
These brands are catering to the middle class and are not very high in prices Good Value Strategy – Videocon
Introduced frost-free refrigerators in India
Value for money products
Lowest prices in the market - catering to the middle class of the society
Economy Strategy - Voltas, Allwyn
Cater to the middle and lower middle class of buyers with their low priced ranges

Distribution :

Distribution Network :

Distribution :

46 Distribution Aimed at reducing inventory holding cost - direct delivery of the product to customer once the dealer enters the order.
Corporates willing to invest in creating inventory - holding facilities at dealers end and pay for holding charges.
Intense competition - higher ad spent and emphasis on streamlining distribution network and reduce dealers margin
Whirlpool and Electrolux trying to provide quick service to dealers - allowing to stock within 24 hrs

Environment :

47 Environment Montreal Protocol - Environment conciousness - depletion of Ozone layer
CFC Free Refrigerators
Year 2003- deadline by which Indian markets is to be replaced with CFCs free refrigerator -Move towards using HCFC ( Hydro chloro fluoro carbons)
HCFCs – non-harmful, easily available, no major technology change
Year 2030 – move into using HFCs (Hydrofluorocarbons)
HFCs – major technology changes in manufacturing process, cost of HFC-based pilot plant is approx 10 crore. Whirlpool India has already set up a 0.4mn unit capacity plant near Pune to manufacture CFC-free refrigerators
LG Electronics has converted its entire 300-litre plus range of models as CFC-free
Electrolux AB has found a cost-effective alternative way of a hydrocarbon coolant (R-600)

Policy :

48 Policy Till the late 80s - white goods sector was labelled as a luxury goods industry- an oppressive regime of licenses and taxation
1993-94 government removed all investment obstacles

Future Trends :

49 Future Trends Replacement market is expected to increase to 25-30% on account of faster replacement (further induced by exchange scheme)
Refrigerator market is expected to grow at a CAGR of 14% in the medium term aided by the rising per capita income and growing consumerism
The demand for refrigerators is expected to be about 3.6 million units in 2000-01 with a penetration rate of about 13%